April 18 (Bloomberg) -- Blackstone Group LP, the buyout
firm taking SeaWorld Entertainment Inc. public today, is valuing
the theme-park operator more expensively than its peers after
refusing takeover offers for the company.

The initial public offering is seeking as much as $702
million, regulatory filings show. The midpoint of the price
range values Orlando-based SeaWorld’s common stock at about $2.4
billion, or 21 times last year’s free cash flow, or operating
cash flow minus capital expenditures, according to data compiled
by Bloomberg. That’s at least 64 percent more than rivals Six
Flags Entertainment Corp. and Cedar Fair LP.

Blackstone chose an IPO for SeaWorld, snubbing takeover
bids from Apollo Global Management LLC and Onex Corp., because
the firm expects the offering to yield better returns over time
than a sale, a person familiar with the matter said earlier this
year. SeaWorld may be hard-pressed to justify the premium
because the company and its peers operate in a mature business
that’s probably not ripe for large-scale expansion, said James
Hardiman, an analyst at Longbow Research LLC.

“From an attendance perspective, they’re pretty slow
growers,” said Hardiman, who covers theme-park operators for
the Independence, Ohio-based firm. “I don’t know that there’s
any low-hanging fruit that would make SeaWorld’s growth
accelerate after it becomes public.”

SeaWorld attendance increased 3.2 percent in 2012 to more
than 24 million visitors, compared with about a 6 percent
increase at Six Flags. Free cash flow is a better measure of
operating performance for amusement-park companies than other
metrics because it takes capital expenditures into account, said
Hardiman and Michael Corty, a Chicago-based analyst at
Morningstar Inc. in Chicago.

Room for Growth

Representatives at SeaWorld and Blackstone declined to
comment. Blackstone today boosted the amount of shares it’s
selling in the IPO to 16 million from 10 million, bringing the
total on offer to 26 million.

While the top theme-park operators aren’t likely to achieve
large-scale growth in the coming years, they all have room to
improve profitability by charging higher admission prices,
increasing customers’ spending inside the park, and cutting
costs, the analysts said.

SeaWorld, famed for its killer whales named Shamu, had
about $191.7 million in capital expenditures in the 12 months
through December and free cash flow of $111.8 million, according
to regulatory filings and data compiled by Bloomberg. The
company operates 11 theme parks, including two under the Busch
Gardens brand.

Capital Spending

Much of SeaWorld’s capital spending went toward future
attractions and animal-safety measures, according to the
regulatory filing. The company described those costs as
“elevated” for 2011 and 2012, and plans to reduce its level of
expenditures to an average of about 10 percent of total revenue
starting in 2014, excluding safety and infrastructure
investments.

Six Flags, the Grand Prairie, Texas-based operator of 18
parks in the U.S., Mexico and Canada, had a market value of
about $3.6 billion as of yesterday, or about 13 times last
year’s free cash flow, filings show. That compares with 12 times
for Cedar Fair, the Sandusky, Ohio-based operator of parks from
Cedar Point in Ohio to Knott’s Berry Farm.

SeaWorld, which will have about $1.6 billion of net long-term debt after using IPO proceeds to repay borrowings, aims to
have an enterprise value of about $4 billion at the midpoint of
the offering range. Blackstone took control of SeaWorld in 2009
after agreeing to buy Anheuser-Busch InBev NV’s amusement-park
business, in a transaction then valued at as much as $2.7
billion.

Other Metrics

Using another measure, SeaWorld could be considered cheaper
than at least one of its peers. The company’s enterprise value
at the midpoint of the IPO price range is about 10 times
earnings before interest, taxes, depreciation and amortization
of $393.8 million in the 12 months through December, data
compiled by Bloomberg show. That compares with about 14 times
for Six Flags and 9.8 times for Cedar Fair, the data show.

Blackstone, which owns all of SeaWorld’s equity, will hold
about 68 percent following the sale. The offering terms would
value Blackstone’s stake along with the cash received from the
IPO at about $2 billion, twice the firm’s $1 billion equity
investment in the 2009 leveraged buyout, according to data
compiled by Bloomberg and a person with knowledge of the
original transaction. SeaWorld had already paid Blackstone more
than $600 million in dividends over the past two years.

Blackstone is taking SeaWorld public after the Standard &
Poor’s 500 Index climbed to a record high this month and an
index of stock volatility dropped to a six-year low in March.
More than 40 percent of the U.S. IPOs this year have been by
private-equity-backed companies, data compiled by Bloomberg
show.

PE-Backed Offerings

The largest was the offering by Taylor Morrison Home Corp.,
the home-builder majority owned by TPG Capital and Oaktree
Capital Group LLC. That Scottsdale, Arizona-based company raised
$722.9 million in its offering this month, including an
overallotment option.

Private-equity-backed firms have filed for at least $3.5
billion in U.S. IPOs this year, according to data compiled by
Bloomberg. The largest so far is that of HD Supply Holdings
Inc., the construction supply business owned by private-equity
firms including Carlyle Group LP, which filed for an offering
using a $1 billion placeholder amount.

Other firms that used smaller placeholder amounts also may
raise more than expected. Warburg Pincus LLC’s Bausch & Lomb
Holdings Inc. filed for an IPO in March using a $100 million
placeholder amount, and people familiar with the matter have
said the eye-care maker could raise as much as $1.5 billion in a
sale.

SeaWorld and Blackstone are offering the shares for $24 to
$27 each. SeaWorld plans to list on the New York Stock Exchange
under the symbol SEAS, and Goldman Sachs Group Inc. and JPMorgan
Chase & Co. are leading the sale.